403(b) overview

ARTICLE TAKEAWAYS

  • What is a 403(b) plan?
  • What are the plan features?
  • Who is eligible to open a CB&T 403(b) Basic participant account? 
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A 403(b) plan is a tax-deferred retirement plan that can be offered by public schools, churches and certain nonprofit organizations. Capital Bank and Trust’s (CB&T’s) 403(b) Basic is available only to existing American Funds/CB&T plans. An existing plan is a plan that had at least one participant account established and funded by December 31, 2008, with CB&T. 

To open a participant account for an existing CB&T 403(b) Basic plan, visit 403(b) Basic plan.

Overview of plan features:

Eligible employers 
  • Public educational organizations — including primary and secondary schools, state colleges and universities and junior colleges 
  • Nonprofit organizations (qualified under Internal Revenue Code section 501(c)(3)) — including hospitals, religious organizations, charitable institutions and social welfare agencies 
  • Churches

Plan documents

Written plan:  All 403(b) plans (with a limited exception for certain church plans) must have a written plan. This requirement can be met with either: 

  • A single document 
  • Assembling all of the plan’s contracts, custodial agreements, vendor service agreements and applicable state and local statutes or other governing documents 


Plan sponsors should determine written plan requirements with their legal/tax adviser. 

Information sharing:  To ensure compliance with certain Internal Revenue Service (IRS) rules for 403(b) plans (e.g., contribution, distribution and loan limits), plan sponsors and their vendor(s) must agree to share information about participant accounts. Information sharing provisions may be either: 

  • Included as part of a vendor agreement 
  • Addressed in a stand-alone information sharing agreement 

Eligible employees
Universal eligibility:  If any employee has the right to make elective deferrals, all employees of the employer must be eligible, with certain limited exceptions. Certain categories of employees may be excluded from eligibility. For more information, see Retirement Plans FAQs regarding 403(b) Tax-Sheltered Annuity Plans.

Required testing 

Coverage and Actual Contribution Percentage (ACP) nondiscrimination tests apply. 

Exceptions include: 

  • Certain governmental plans 
  • Church plans 


Plans can automatically satisfy ACP testing by following certain safe harbor guidelines, which includes making predetermined mandatory employer contributions.

Participant salary deferral contributions 

Annual limit:

  • 2023: Participants can contribute up to $22,500
  • 2024: Participants can contribute up to $23,000

Age-50 catch-up:

  • 2023: Participants who are at least age 50 by the end of the calendar year can contribute an additional $7,500
  • 2024: Participants who are at least age 50 by the end of the calendar year can contribute an additional $7,500
     

15-year catch-up:  Participants who have worked 15 or more years for the same organization may be able to contribute an additional amount.

For more information, visit the IRS’s Retirement Topics - 403(b) Contribution Limits.

Employer contributions

Employer contributions are discretionary. 

Maximum Annual Addition (total employee and employer contributions)

2023: the lesser of 100% of participant’s compensation or $66,000

2024: the lesser of 100% of participant’s compensation or $69,000 

ERISA

Plan sponsors should refer to their legal/tax adviser to determine if their plan is subject to ERISA. 

Generally, a 403(b) plan is subject to ERISA if the plan sponsor either: 

  • Contributes to the plan (matching or nonelective)
  • Makes discretionary determinations in administering the plan. (See the Department of Labor’s Field Assistance Bulletin No. 2007-2 for more information.)


ERISA exemptions:  Government-sponsored plans, such as public school systems and county hospitals are not subject to ERISA — even if the plan sponsor contributes to the plan. Church-sponsored plans are also exempt unless the plan specifically elects to be covered. 

ERISA requirements: ERISA plans must file an annual Form 5500 and are subject to Title I of ERISA, which includes disclosure requirements, such as providing a summary plan description and summary annual report to employees.

Generally, ERISA plans with more than 100 participants must also have an annual independent audit of the plan’s financial statements. 

Related content

Opening 403(b) Basic accounts

403(b) Basic contributions and tax information

403(b) Basic distributions and tax information

Return to 403(b) Basic plans >

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